How do you measure an economy? It's not an easy task, especially when the economy is as huge as our own. Economists do it by taking a number called the GDP (gross domestic product) and dividing it by the population. In our case, that's some $13 trillion or $14 trillion divided by something around 300 million people. Of course, not all 300 million of us are in the work force, but you get the idea.
That still doesn't tell you much about the industrial sector, however. When it comes to gauging industrial performance, a better indicator is— improbably enough—the per capita consumption of machine tools.
Machine tools may not strike you as the likeliest of economic indicators, but consider the role they play in a modern economy. Ranging from small lathes to enormous machining centers that do everything but talk, machine tools produce the parts needed for all other manufacturing operations with stunning speed and accuracy. The machine tool is, in effect, the ultimate value-added device—a fact that hasn't gone unnoticed by economists. There are a number of groups and governments that track machine tool sales and compile annual statistics. (The ones I'm using here are from the Association for Manufacturing Technology—or AMT—in McLean, Va.)
So where do we stand when it comes to the consumption of machine tools? You may be surprised.
In 2006 (the latest year for which statistics are available), the People's Republic of China consumed (purchased) more machine tools than any other country, some $13.2 billion worth. The United States came in second, with almost $6.4 billion bought by American producers. The United States was followed by Germany at $5.2 billion and South Korea at just over $5 billion. Japan came in next, according to the AMT, with $4.2 billion in machine tool purchases in 2006.
But these are the gross numbers. The really interesting statistics are the per capita numbers—a nation's total capital investment in machine tools divided by its population. When it comes to per-capita spending, three small countries have vied for the top spot for several years. In 2006, they were Taiwan at $127 per person, Switzerland at $109, and South Korea at $105.
As for other industrial powers, Germany and Italy were close at $62 and $65 per citizen, and Japan came in at a surprisingly low $33. And although China buys far more machine tools than any other country, it appeared fairly far down on the list of per capita expenditures, investing only $10 per person. Russia's per capita spending on these crucial machines was a paltry $6 in 2006.
Where do we stand in that ranking? Well, while we bought more than any other modern economy except China, our per capita number in 2006 was $21—not exactly near the top but still, a long way from the bottom. What does that say about the U.S. economy? Seems to me it says we're doing far better in terms of our industrial future than most of our pundits give us credit for. Machine tool purchasing and use implies a productive economy. We are such an economy, and that's good news for all of us.
For distribution centers and material handling companies, specifically, it's good news as well. The equipment you use and maintain and the products you ship, store, and deliver are all connected to the machine tool industry in one way or another. The relative strength of the machine tool industry in the United States suggests that U.S. business in general, and industrial distribution in particular, can look forward to a prosperous future.